The Life and Times of a Former Academic

Margin Call

October 31, 2011

By now we all know what happened on September 16, 2008. The question on first-time writer/director J.C. Chandor’s mind is what was happening on September 15, and from the looks of it half of Hollywood is interested as well, since his film Margin Call not only boasts a superb cast, many recognizable names show up in its list of producers and benefactors. And well they should, since what Chandor has come up with is a tight, solid exploration of exactly this question.

At 2:15 the night before the crash, eight people sit around a conference room in an investment banking firm — a fictional one, but roughly based on Lehman Brothers. Junior analyst Peter Sullivan (Zachary Quinto, who also produces) was working late when he discovered that the volatility in the market of mortgage-backed securities his department works in has started to overshoot the historical bounds their model was designed for. His colleague, Seth Bregman (Penn Badgley) is there, along with senior trader Will Emerson (Paul Bettany) and their head of trading Sam Rogers (Kevin Spacey), who called the meeting. On the other side of the table sit the more senior executives like Jared Cohen (Simon Baker), Ramesh Shah (Aasif Mandvi), Louis Carmelo (Al Sapienza), and head of risk Sarah Robertson (Demi Moore).

All of them are incredulous at the possible outcome of the slowdown they’ve been seeing. So far the they’ve been lucky, but the next time the volatility risk exceeds the design constraints of their model the loss from their one department could be more than the current total value of the entire firm. Peter’s former boss, Eric Dale (Stanley Tucci), had tried to warn them about this before; not only was disregarded, but he’s just been fired the previous day and is now unreachable.

The film talks its way around the technical details to some extent, but it’s not really about the models anyway; it’s about the people and how they act in this situation. Still, the rough outlines aren’t hard to grasp. Go look for the infamous film of the Tacoma Narrows Bridge if you haven’t seen it; that’s not a bad place to start. The department’s computerized trading algorithm isn’t a bridge, but it’s still based on a carefully-tuned mathematical model, which makes certain assumptions. Historical observations of the market indicated that it tended to go up and down a certain amount under normal conditions. Some days it fluctuated a little, while others it fluctuated a lot, but the fluctuations were within certain bounds, and the model took those historical bounds into account. But when the fluctuations pushed beyond that limit, they could start feeding back on themselves and shake the whole thing to pieces.

The firm’s usual strategy was to take in certain assets, hold them, repackage them a certain way, and pass them on to someone else at a profit. The whole process usually took a month, but suddenly they realize that they are holding one very big, very hot potato, and they’re about to get stuck with it. When the CEO, John Tuld (Jeremy Irons) is called in, he wants to dump the lot, possibly at steep losses. This would save what money they could, but at the possible cost of their good name and the stability — maybe the existence — of the market as a whole.

The film unspools slowly and methodically; the lines sound out like drumbeats portending the inexorable bloodbath to come. It’s original to the screen, but it certainly feels like a play. And it wouldn’t be too far off to call it a Greek tragedy — sacrificial goat and all — except that while the firm’s downfall is ultimately due to its hubris, in this version all of Thebes will suffer along with Oedipus.

As a writer, Chandor knows how to put all of these different characters into a script. He knows how to orchestrate the quadrille that brings them one by one into contact with each other as the action plays out. And as a director, he knows how to get out of the way. The cast all rise to the call, especially Spacey and Irons, who end up in the two most diametrically opposed positions.

Lest you think this film is some liberal hatchet-job, I want to assure you of how balanced it comes off. Yes, these people screwed everybody’s pooch, and yes, some of them show unmitigated ego and gall. But none of them are really evil; they made some amazingly short-sighted, well-meaning mistakes, and most of them know it. It would be nice if their real-world counterparts would own up in public the way these characters do in private.